Banking

Renaissance keeps two funds alive after rebound

Move highlights a good run for computer-driven, trend-following hedge funds

By

AlistairBarr

SAN FRANCISCO (MarketWatch) -- Renaissance Technologies LLC, one of the largest computer-driven hedge-fund firms, is keeping two big funds open to outside investors after their performance recovered this year, according to a letter obtained by MarketWatch Tuesday.

Renaissance Institutional Equities Fund, or RIEF, is up 6% in the first eight months of 2010, while Renaissance Institutional Futures Fund, or RIFF, climbed 14% in the same period.

Renaissance also announced plans to cut fees on RIEF and said that staff of the East Setauket, N.Y-based firm recently invested "substantial capital" in the two funds.

James Simons, who founded Renaissance in 1982, stepped down in January, leaving Peter Brown and Bob Mercer as co-chief executives. The firm's new leaders told The Wall Street Journal in March that they were considering shutting down RIEF and RIFF after the funds struggled in recent years. See story about Renaissance here.

But after a rebound in performance this year, Brown and Mercer told investors in a letter dated Sept. 13 that the firm will keep running the funds.

"Our confidence in these quantitatively-managed, long investment horizon products has been bolstered both by an intensive reexamination of their underlying technology and by their performance during the recent tumultuous economic period," the CEOs wrote.

Since it started five years ago, RIEF has generated a cumulative return of 4.55%, through the end of August, with 60% of the volatility of the Standard & Poor's 500 Index, which lost more than 5% in the same period, they noted.

RIFF had a good start when it launched in October 2007, but suffered poor performance in 2008, when the global financial crisis left the average hedge fund down almost 20%.

"Improvements to the system contributed to its subsequent solid recovery, and by now RIFF has cumulatively earned 10% since inception," Brown and Mercer wrote.

Trend-following, computer-driven hedge funds, like those run by Renaissance, have had a good run in recent months. These types of funds returned 3.65% on average in August, making them the best performing strategy in the industry that month, according to Chicago-based Hedge Fund Research.

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